The New Talent Equation


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The New Talent Equation

  1. 1. This article originally appeared in the June 2009 issue of The journal of high-performance business Special Report: Dealing with the Downturn The Workforce The new talent equation By Peter Cheese, Catherine S. Farley and Alan Gibbons The objective at the heart of successful talent management in difficult times: to think ahead and to think more strategically about creating a workforce with the capabilities to outperform the competition as the economy turns around. A number of fresh approaches are available to help companies go beyond responses focused only on staff reductions.
  2. 2. These are anxious times for workers many organizations are not equal to and the companies that employ the challenges that lie ahead. them . . . or used to employ them. But for employers, it isn’t only a Once a first round of workforce reduc- matter of how to effectively manage tions is complete, for example, then workforce costs in the short term. what? Such initial adjustments are Just as critical is finding ways to use relatively easy to make and are, for the the immediate economic crisis as an most part, good for the company: Low opportunity to refashion an organi- performers are quickly identified, and zation with the people and capa- the rest of the workforce rarely regis- bilities that can create competitive ters surprise at the choices made. But advantage in the longer term. the next round of cuts, if necessary, is usually much harder, especially for For many companies, seizing on that companies with incomplete informa- opportunity is going to take some tion about employee performance and work. The current business and capabilities. This kind of information is economic environment is exposing essential for achieving the objective at a host of weaknesses in the talent the heart of successful talent manage- management practices of many ment in difficult times: to think ahead organizations, as well as the lack of and to think more strategically about a comprehensive understanding of creating a workforce with the capabili- skills, capabilities, key workforces ties to outperform the competition as and top talent. the economy turns around. Indeed, in making decisions about A number of actions and fresh ap- the future of different jobs and roles, proaches are available to companies many companies are flying blind. to help ensure that their workforce Without a clear sense of which capabilities and talent support their workforce capabilities are essen- ability to stay competitive. With these tial and which are secondary, what approaches, companies can go beyond workforces are business-critical and responses focused only on reductions. what are not, who the top perform- They can recalibrate jobs and sala- ers are and whose performance is ries rather than simply cut positions average or worse, companies cannot or hours. They can identify the most make the right talent decisions. strategically necessary roles, where hiring should continue even during The result can be the loss of high- a recession. They can support their potential talent along with critical workforce in new ways and increase capabilities, knowledge and relation- opportunities for collaboration. They ships, and a diminished ability to can identify the top performers who perform and compete successfully. must be retained. They can finally Given what appears to be the longer- act on the global sourcing strategies term nature of this downturn, it is they’ve been considering to leverage all the more important for organi- talent in locations around the world. zations to get talent management right. And soon. Organizations can also do better long-term workforce planning, using Fresh approaches this crisis as an opportunity to make Talent strategy is, in fact, as important changes they probably should have as any other part of an organization’s made years ago. And they can ap- overall strategy, regardless of the proach the downturn as an opportu- business conditions. Unfortunately, nity to develop a new generation of the harsh glare of the downturn has insightful and strong leadership. 2 Outlook 2009 exposed the fact that the talent plan- Number 2 ning and management capabilities of (Continued on page 4)
  3. 3. How to identify strategic talent Organizations have had varying degrees of success with a number One of the results of an SRA may seem counterintuitive during of new approaches to cutting workforce costs (see story). But a recession: Some employees may actually need a pay increase what they need in addition is a more comprehensive approach to because of their importance to the organization. This reinvestment reducing workforce costs without impairing workforce quality. is more than offset, however, by recalibrating the pay of “core” and To do this effectively, a company needs a better understanding “necessary” workers (depending on their performance grades) of the different roles within its workforce and needs to conduct and by counseling low performers in nonessential roles out of what we call strategic role assessment, or SRA. the organization. The purpose of SRA is to identify strategic talent—individuals who Of course, SRAs can also mean that some workers in fact are top performers relative to their peers and who perform roles receive salary reductions—perhaps back to levels from three to that directly support an organization’s strategic goals (see chart four years ago. Yet the assessment advantage from a cultural below). An assessment of the entire workforce, function by func- impact perspective is that the process is comprehensive and tion and business area by business area, can be conducted, plotting equitable. Management can say to the entire workforce, “We’re people according to two spectrums: performance (from exception- going to use business-case data and workforce performance al to low); and value (from mission-critical to nonessential). analysis to look at where strategic value is being created in the organization, and we’re going to adjust pay scales in light of This analysis then enables organizations to become far more that assessment.” nuanced and informed about how they invest in their workforce. Many organizations today routinely waste payroll This approach also has the potential to encounter less budget by failing to set salary levels properly. The result: too resistance from labor unions. It does not unfairly target one much money paid to the wrong people and too little to the ones location, factory or workforce segment over another. Its aim whose contribution is mission-critical. During these economic is simply to reallocate rewards where they will create the times, such waste is unacceptable, especially since payroll can best return on investment. represent from 40 percent to 70 percent or more of revenues for service or knowledge businesses. The ultimate result of a strategic role assessment is a powerful compensation strategy that is tailored to the organization With the SRA approach, roles can be clearly segmented and and thus difficult for its competitors to replicate. And the reward decisions can then be made on a transparent and equi- payoff can be significant: from 6 percent to 10 percent of table basis, each job being paid according to its strategic value total payroll costs over a one- or two-year period, with the to the organization and market competitiveness. Base pay and added advantage of having a less negative effect on work- total cash compensation levels can be set appropriately and force morale and engagement. In fact, this is a strategy that then checked against local-market benchmark data. can legitimately claim to protect jobs. Performance Exceptional High Average Low Mission-critical Value to the Core organization Necessary Non-essential Provide additional rewards and experiences Identify as at risk: Provide additional training and provide development opportunities to and performance management attention to benefit individual and organization improve motivation and performance, and/or to move into necessary or core roles Provide training and experiences to prepare for mission-critical roles Divest/seek alternative sourcing Source: Accenture analysis 3 Outlook 2009 Number 2
  4. 4. (Continued from page 2) Survival: Slashing jobs or slashing costs? One mistake companies can make market conditions. Not a comfort- during a recession is to confuse elimi- ing statistic. nating jobs with eliminating costs. Indiscriminate workforce cuts can Making across-the-board headcount also weaken the ability of organi- reductions, without adequately tak- zations to perform at competitive ing strategic capability or areas for levels. Performance degradation can growth into account, can be damag- show up almost immediately in lower ing to longer-term positioning. One revenues and higher customer attri- major retailer, for example, recently tion. It also can damage the work- instituted a voluntary retirement force in the longer run by taking out What organizations program for its workforce without top talent that was simply unlucky adequately specifying who was enough to work for the wrong unit or need is a more eligible. The result: the exit of hun- location at the wrong time. dreds of employees with a wealth of comprehensive knowledge and experience that the Some organizations are trying new, approach to reducing company really didn’t want to lose. creative alternatives to reducing workforce costs—for example, reduc- workforce costs that Poorly informed cutbacks can ing base pay or using variable pay does not compromise weaken an organization in multiple scales linked to performance. Another ways. Such workforce reduction approach is to cut hours for all workforce quality. programs are damaging to the employees or to require them to take morale and goodwill of the com- unpaid vacation days. pany, and to the engagement and productivity of those workers who In March, for example, California remain (see sidebar, opposite). announced “self-directed furloughs” for state workers, requiring affected That damage can be long-lasting employees to take any two unpaid and especially insidious insofar days of their choice per month. as the extent of the problem may The state estimates this will save not be fully appreciated during the $1.3 billion through June 2010, downturn. Temporary constraints at which time the furloughs will on changing jobs may mean that end. Only time will tell, however, voluntary attrition drops to near what negative long-term effects zero for a time. But high employee such an approach—which amounts retention does not necessarily mean to about a 9 percent pay cut—might high levels of employee satisfaction. have on employee engagement and retention. For example, in a recent Accenture survey, the majority of more than There are alternatives to cuts and 2,600 middle managers in 17 mar- layoffs of business-critical work- kets in North and South America, forces. One major telecommunica- Europe, Africa and Asia Pacific said tions company, for instance, has they were staying with their current been actively seeking to lend its companies only because they felt highly trained engineers to outside they had no choice. In addition to organizations on a temporary basis. the 12 percent of respondents who The employees have the opportunity are actively looking for a new job, to work on fresh challenges at another 60 percent said they would an equivalent salary, while the 4 Outlook 2009 consider new employment but are company is able to temporarily Number 2 not currently looking given current reduce headcount.
  5. 5. Such alternatives can be effective. what Accenture calls a strategic But what organizations need in role assessment—an evaluation of addition is a more comprehensive the entire workforce according to approach to reducing workforce performance levels and the busi- costs that does not compromise ness value delivered by different workforce quality. To do this individuals and roles (see sidebar, effectively, a company should do page 6). Repositioning: Workforce planning that reinvents the organization An economic downturn is actually knowledge of top talent before they a time to think much more boldly leave or retire? about what kind of talent is needed to drive an organization forward, Next, look at what’s happening ex- how essential skills should be ternally. It has become clear during sourced, what an optimal culture the past few years that demographic would be and so forth. So in ad- changes and educational shortfalls are dition to addressing their most having a profound effect on the abil- immediate workforce cost prob- ity of companies to source and retain lems, companies must also engage the kinds of workers needed to propel in more comprehensive kinds of the business forward. Employees now planning that can bolster their entering the workforce—often called medium-term ability to reposition Generation Y or Millennials—are often themselves. People are expecting less inclined to work on the terms long change, and it’s important not to let accepted by their parents; they’re usu- that opportunity go to waste. ally looking for a more balanced life, they have a strong focus on meaning- Done well, workforce planning is ful work and they want to work for a rigorous process in four phases. companies with a social conscience. The first phase begins by getting a handle on the demand side of the The third phase of the planning workforce equation: What kind of process analyzes the gap between workforce with what kinds of skills workforce demand and supply, is needed to execute business strat- which leads to the final phase: egy? What are the critical work- the development of the actual plan. forces that need to be filled with top The options available to companies talent—near term and long term? at that point are especially impor- tant to repositioning the workforce In the second phase, attention shifts for challenging economic times. to the supply side. First, what’s They include the following. happening? What impact does the fact that people are generally less Global sourcing and recruiting inclined to leave a job voluntarily A recent survey conducted by Ac- during a downturn have on the centure in collaboration with the overall workforce mix? Does it slow Economist Intelligence Unit found that the advancement of some emerging companies are increasingly turning to talent? What impact do those who global sourcing and delivery in lower- are leaving have on organizational cost countries not only as a means 5 Outlook 2009 knowledge and experience? Is the Number 2 organization capturing the critical (Continued on page 7)
  6. 6. Keeping employees engaged in tough times By Elizabeth Craig During an economic downturn, keeping employees engaged—aligned Create meaningful work and career opportunities with and invested in the company’s current business strategy, and Leaders, particularly in uncertain times, must offer a clear and energized to overcome challenges—can be particularly daunting. But compelling direction and vision for the future and help employees it can also make a critical difference in competitiveness. understand how their work relates to the organization’s goals. Individuals’ sense of meaning and purpose in their work derives, Various studies have shown that highly engaged workforces pro- in part, from an understanding of their roles and how they align duce better business results than disengaged workers—measured with the objectives of the organization. Our research found that in terms such as higher productivity, improved customer satisfac- 72 percent of people who believe their work is significant are tion and better employee retention. But where do you start when engaged, whereas only 24 percent of employees who see little you want to achieve those kinds of results? significance in their work are engaged. Given the bewildering variety of approaches to raising engagement It is also crucial that employees have opportunities to develop levels, many organizations may simply try to pull as many levers themselves and advance their careers. Our research found that as possible—often in ways that do not really engage people or 60 percent of employees who report they are building skills and improve business performance. Without a deeper understanding experience that will help them attain career goals are highly of what inspires employees to engage, it is difficult for companies engaged, while just 7 percent of people without such opportuni- to set priorities for engagement initiatives, or to bring about ties are highly engaged. People without opportunities for career substantial and lasting improvements in engagement. growth are 13 times more likely to disengage at work. One thing is important to note: Improving employee engagement Support employees’ well-being is not necessarily expensive. Indeed, many of the things that Because stress is high in challenging times, maintaining the really matter to a workforce don’t cost anything at all. energy and well-being of the workforce is critical. Demanding long hours during the week and on weekends may deliver some To identify and understand the drivers of employee engagement results in the short term, but only at the expense of a long- and the appropriate organizational responses, the Accenture term depletion of workforce energy. Our research indicates that Institute for High Performance recently conducted a survey of when companies manage work demands so that people have more than 1,200 employees in large US companies across several opportunities to recover from stressful situations and overwork, industries. Our research highlights three keys to improving employees are twice as likely to be engaged than when they employee engagement. have no chance to recover from their exertion. Build a culture of trust and respect for the individual Companies can also support engagement by providing critical Our survey found that people are four times more likely to be resources, including information, additional training, increased highly engaged in the success of their organization when leaders autonomy, staff, and enabling tools and technologies. behave in trustworthy and predictable ways. When a company is downsizing, it needs to work particularly hard to retain employees’ When faced with budgetary constraints, organizations often trust. It’s usually not layoffs themselves that threaten engagement; first slash many of the resources that support employees. it’s the way they are handled. People are more likely to engage However, in our research, people who reported that they when critical business decisions are fair and transparent and are had the resources they needed to do their jobs effectively communicated by leaders in an open, honest and proactive way. were nine times more likely to be highly engaged than those without them. Maintaining core training, connecting people Trust and respect matter. People who perceive that fellow em- across the organization to help them support one another, and ployees are treated with respect, dignity and attention to their encouraging knowledge sharing are all important measures to positive self-regard are five times more likely to be highly en- take to support employees. gaged than people who report low trust in and respect for their organizations and leaders. Employees who do not feel respected By cultivating the three conditions explained here, companies lay are 17 times more likely to be highly disengaged than those the groundwork for employee engagement—inspiring their talent who do feel respected. Simply letting employees know that their to help the organization survive these challenging times and efforts are appreciated can boost engagement. achieve high performance. 6 Outlook 2009 Number 2
  7. 7. (Continued from page 5) loyalty of temporary workers and their alignment to a company’s of reducing costs but also as a way goals and strategy are more doubt- to improve productivity, increase the ful. How much to invest in their pool of available talent and complete skills building and development is critical projects at a faster pace. also a question, so bringing in these kinds of workers is usually done In the research, which surveyed with specific skill areas in mind. executives across the Americas, Europe and Asia Pacific, 22 percent Shared services and outsourcing of respondents said they have seen approaches are other ways to reap direct business cost savings of more the benefits of a variable workforce. than 20 percent through global Today, as in previous downturns, sourcing. Seventy percent have there is growing interest in outsourc- experienced increases in business ing, especially for particular types productivity from global sourcing, of jobs. Non-core activities, areas and more than half have seen im- of the business where attracting The shortage of provements in the quality of both and retaining talent may be harder, business and IT performance. or more repetitive transactional or leadership and of analytical tasks where it is important other critical skills This global perspective on the to reduce costs without losing quality sourcing of work must also inform can be appropriate for outsourcing has led to a much the way a company sources work- or partnering options. stronger focus on force talent in general. Companies need to be flexible in finding and One grocery retailer found itself global talent sourcing. recruiting talent wherever it exists. in a situation where it could not The shortage of leadership and effectively retain salaried workers of other critical skills has led to in the forecasting function—an a much stronger focus on global essential job but one involving talent sourcing in recent years, and repetitive analytic and reporting the economic downturn makes that responsibility. The company’s perspective all the more important. solution was to find an outsourcing partner that could provide a reliable Accenture’s most recent study on source of forecasting experience the multi-polar world (“Strategies and knowledge. for achieving high performance in a multi-polar world: Global choices According to the company’s senior for global challenges,” 2009) found vice president for planning and that 51 percent of high performers merchandise control, “The forecast- (versus 34 percent of low perform- ing group involves very technical ers) are likely to seek to expand kinds of skills and experience, and their workforce in foreign markets, so I prefer having a resource that both by increasing the number of can provide me with the very best markets where they recruit and by people on an ongoing basis and expanding in markets where they who have a bigger pool of talent to already recruit. draw from.” Outsourcing and contingent labor Retraining and redeployment Using contingent workforces or For companies working to turn temporary and contract labor is talent into business advantage, one way to shore up important retraining and redeploying that capabilities without incurring the talent is another critical part of costs associated with long-term medium-term repositioning. If 7 Outlook 2009 employment. But this approach a workforce analysis finds ex- Number 2 carries risks. The longer-term ceptional performers in jobs that
  8. 8. must be eliminated, it is vital that performers—compared with fewer companies find the means to retain than six out of 10 low perform- those performers by matching ers—have established an academy them to more strategic roles. approach to learning, which more formally recognizes the key skill Last year a global carmaker halted areas and learning programs they production of several models at need to keep the capabilities of a number of its US plants. But mission-critical workforces fresh instead of letting the 4,500 affected and relevant. workers go, the company opted to retrain these workers for new tasks Talent acquisition and roles. Training classes included A general slowing of the recruit- High-performance productivity improvement, materials ment engine is inevitable during a handling and workplace hazards, recession, but smart companies will businesses ensure that diversity and ethics. According to never turn it off completely. But their workforces are one of the company’s managers, isn’t hiring during a severe down- “This was the first chance we’ve turn virtually unthinkable? In fact, continuously equipped really had to live out our values. skill shortages will remain and may We’re not just keeping people on even be aggravated in a downturn with the technical the payroll because we’re nice. At because the need cannot easily be and managerial skills the end of all this, our hope is that masked. Many companies have dis- we’ll end up with a more skilled covered that they cannot entirely needed to respond to North American workforce.” shut down university recruiting a changing global and then immediately restore it to An organization’s ability to share full strength somewhere down the business environment. knowledge, to deliver effective road. Some companies have taken learning at the right time, and to years to reestablish a campus re- capture experience and critical cruiting foothold after suspending knowledge has never been more their presence for an extended time. important. Learning is an essential talent management capability, but Smart companies will also keep it is often the target of cost cutting an eye out for skilled workers who in tougher times. in good times may have been too difficult or expensive to attract Now is the time to embrace and but who are now available thanks employ some of the new ways of to workforce reductions in other learning and sharing knowledge. companies. Web 2.0 technologies can have a huge impact on how people Hewlett-Packard owes much to connect and learn, at lower de- this mindset. Jim Collins, author livery costs. When almost every of the bestselling books Good to organization is cutting back on Great and Built to Last, related in internal expenses, collaboration a recent interview that “if you go tools and Web 2.0 communication back in history, a few companies approaches represent a real oppor- used difficult times to bolster their tunity to keep people connected legions of talent. After World War and engaged. II, all the government labs were shutting down, and engineers were Our research has found that high- streaming out. Hewlett-Packard was performance businesses ensure that actually going through a layoff. their workforces are continuously But at the same time, Bill Hewlett equipped with the technical and and Dave Packard said the greatest managerial skills needed to respond opportunity they ever got wasn’t 8 Outlook 2009 to a changing global business envi- technology; it was the opportunity Number 2 ronment. Nearly nine out of 10 high to hire those engineers.”
  9. 9. Growth: The importance of leadership development All of the actions discussed to this The point is to turn the current point—workforce assessments and economic situation into a learning planning, retraining, global sourcing experience that can benefit current of work and talent—contribute to an leaders, as well as those who will organization’s ability to position itself form the next generation of leader- for growth when the economy begins ship. Burt Tansky, CEO of Nieman to turn around. Marcus, noted recently: “I’ve been telling many of our young people One last, crucial element in turning who have never been through this talent to business advantage during [kind of downturn] to study what’s this recession, however, remains: going on today, study the kind leadership development. It is no of things that are being put in exaggeration to say that today’s eco- place to minimize the stress, nomic crisis is a leadership training because as their careers develop, and testing ground, under the most they’re going to have to face some stressful conditions. So every orga- of this again.” nization must step up and use the current economic situation to test The next step, then, would be for and develop its next generation of organizations to institutionalize leadership. At the same time, it must those insights into what’s happen- also make sure it is looking after its ing today and use them to advance current leaders, communicating with leadership capabilities throughout them and supporting them. the organization. Here, insights from our colleague Bob Honda Motor Co., for example, has Thomas’s recent book, Crucibles of historically used work projects Leadership, are especially appropriate. as the foundation for developing In the book, he argues that what leaders. Honda project managers matters most in leadership develop- are expected not only to produce ment is not just innate capabilities results but also to create a learning but what one makes of experience— contract with the company around particularly the traumatic and often the leadership skills developed unplanned crucible events that chal- during the course of the project. lenge one’s identity as a leader. As Applied to a recessionary environ- Thomas writes, “The ability to find ment, that kind of project-based, meaning and strength in adversity experiential approach to leadership distinguishes leaders from non- development can make young leaders.” (For a related article, see leaders attuned to what they are “Turning experience into leadership,” learning, and help them share Outlook, January 2008.) experiences with their peers. It is easy enough to say that companies that can rally their people will have a better chance to thrive during and after the economic downturn. But effective talent management is not simply a matter of exhortation or charisma. Close, comprehensive and scientific analysis of the capabilities needed to achieve high performance is vital. If workforce cuts must be made, a scalpel and not a machete is in order. 9 Outlook 2009 That is, the types of close analysis discussed here—strategic role assessment Number 2 and comprehensive workforce planning—enable organizations to plot a path
  10. 10. forward that is far more informed about what skills the company needs, who in the workforce has those skills, and how such skills can be sourced in the most cost-effective manner if they cannot be found or developed internally. It’s workforce talent that is feeling the effects of today’s economic crisis most profoundly. At the same time, this crisis could well be the period when strategic talent management finally comes of age. About the authors Peter Cheese is the managing director for the Accenture Talent & Organization Performance service line, which focuses on talent management, the HR function, and organization and change management. In addition to his work with clients in all industry sectors around the world, Mr. Cheese speaks at a wide range of conferences and events, and is coauthor of The Talent Powered Organization (Kogan Page, 2007). He was named one of Consulting magazine’s “Top 25 Consultants” for 2008. Mr. Cheese is based in London. Catherine S. Farley is the Seattle-based managing director for the Accenture Talent Management group. Ms. Farley has extensive experience with workforce restructurings and the human resource implications of this type of change, including executive leadership, talent management, organizational structure and design, learning, business readiness and change management. She has led major transformation efforts for large global clients, including several Fortune 50 companies. Outlook is published by Accenture. © 2009 Accenture. Alan Gibbons leads Accenture’s Global Performance and Rewards Consulting group. In All rights reserved. addition, Mr. Gibbons, an active thought leadership contributor, is particularly interested in enabling performance management processes to reach their full potential by clearly linking The views and opinions in this article them to total rewards programs. He is based in Manchester, England. should not be viewed as professional advice with respect to your business. Accenture, its logo, and High Performance Delivered Elizabeth Craig is a Boston-based research fellow at the Accenture Institute for High are trademarks of Accenture. Performance. She conducts research in the area of talent management, with a focus on employee engagement and retention. Dr. Craig is coauthor of The Talent Powered The use herein of trademarks that may Organization (Kogan Page, 2007). Her work has also appeared in Harvard Business be owned by others is not an assertion Review, Financial Times and European Business Forum. of ownership of such trademarks by Accenture nor intended to imply an association between Accenture and the lawful owners of such trademarks. For more information about Accenture, please visit